Investors need to be aware of changing rules before they invest in mutual funds

   Mutual fund investors need to be aware of changes taking place in mutual fund investing as compliance is mandatory in the areas of 'know your customer' (KYC), third party payments and multiple bank account registration.

KYC compliance    

The threshold for KYC compliance for all individual investors has been changed from Rs 50,000 to nil with effect from January 1, 2011. Hence, KYC compliance is a prerequisite for individuals to invest in Mutual Funds irrespective of the size of the investment. The Association of Mutual Funds in India (AMFI), along with all mutual funds, has made arrangements with CDSL Ventures Ltd (CVL) to undertake a centralised record keeping of KYC documents.

   On completing a one-time process of common standard KYC with CVL, investors can transact across multiple mutual funds without having to repeatedly submit documents with each mutual fund.

   If you are not KYC compliant, apply for KYC compliance by submitting the KYC form duly filled in the required details along with the relevant supporting documents to the nearest Point of Service (POS).

Documents to be submitted:

Photo PAN card Proof of address (latest telephone or electricity bill, passport, bank account statement, voter ID, driving license etc)
Passport size photograph

Third party payment

Investments or subscriptions made through third party payments will not be accepted. Mutual funds have to ensure that third party payment instruments are not used for mutual fund subscriptions.

These exceptions are subject to submission of requisite documents:

Payment by parents, grandparents or related persons on behalf of a minor as gift for a value not exceeding Rs 50,000

Payment by employer on behalf of employee under systematic investment plan through payroll deduction Custodian on behalf of a foreign institutional investor (FII) or a client

When a payment is from a bank account other than that of the beneficiary investor, it is referred to as a 'third party payment'.

Multiple bank accounts registration

Most mutual funds now offer investors the facility to register multiple bank accounts in their folios to receive redemption and dividend proceeds. The individual and Hindu Undivided Family (HUF) investors will be allowed to register up to five bank accounts and non-individual investors will be allowed to register up to 10 bank accounts.

   Multiple Bank Registration Forms will allow investors to:

Part A -

register multiple bank accounts

Part B -

register default bank account

Part C -

delete registered bank account A unit holder can choose any one of the registered bank accounts as default bank account for receiving redemption/dividend proceeds. However, in case a unit holder does not specify the default bank account, the Fund shall designate one of the registered bank accounts as default bank account. The registered bank accounts may also be used for verification of payins (i.e. receiving of subscription funds) to ensure that a third party payment is not used for mutual fund subscription.
   
Documents required for registration or change of bank mandate:

A cancelled original or self-attested copy of cheque leaf with the account number and name of the account holder printed on the face of the cheque
Certificate from the bank, a bank account statement, or a copy of the bank passbook

   A new bank account can only be registered using the designated 'Multiple Bank Account Registration Form'. The proceeds of any redemption or dividend will be sent only to a bank account that is already registered and validated in the folio at the time of redemption or dividend transaction processing.